Jim Thomas, lead attorney for ex-Detroit Mayor Kwame Kilpatrick, talks with reporters outside the Theodore Levin United States Courthouse after a day of jury selection in Detroit on Sept. 6, 2012. / Kirthmon F. Dozier/Detroit Free Press file photo

Detroit Free Press Staff Writer

'Kilpatrick Enterprise' trial coverage

Former Detroit Mayor Kwame Kilpatrick, his father, Bernard Kilpatrick, and his longtime contractor friend Bobby Ferguson were convicted in U.S. District Court in Detroit. They were accused in a conspiracy to enrich themselves by rigging City of Detroit contracts through the mayor's office. Kwame Kilpatrick was convicted on 24 of 30 counts, Ferguson was found guilty on nine of 11 counts and Bernard Kilpatrick was convicted on one of four counts. A fourth defendant, former water department director Victor Mercado, pleaded guilty to conspiracy during the trial and awaits sentencing.

Related Links

When Kwame Kilpatrick was mayor, people gave him gifts. Lots of gifts.

In fact, Kilpatrick lawyer Jim Thomas argued in court today, the mayor received so many gifts of cash -- from well-wishers at a 35th birthday party, for instance -- that this helps explain his client’s unreported income to the Internal Revenue Service.

Gifts, Thomas pointed out, are not taxable for the recipient.

But the IRS wasn’t buying it.

Cash gifts would be non-taxable for the mayor, said agent Ron Sauer from the witness stand in Detroit’s public corruption trial. But gifts cannot explain all $531,401.72 in unreported cash income, Sauer said.

The exchange came in U.S. District Court, where Kilpatrick; his father, Bernard Kilpatrick, and friend and city contractor Bobby Ferguson are charged with conspiring to enrich themselves off the mayor’s office.

The most serious charges -- racketeering -- carry prison terms of up to 20 years. But tax charges, with penalties of up to three years and five years, dogged the former mayor in court today.

Sauer testified that, in addition to the half-a-million in unreported cash, Kwame Kilpatrick also spent way more than he earned as mayor. Sauer, who described digging through bank accounts, unearthing public records and interviewing people over several years, said in 2001-08, Kilpatrick spent nearly $841,000 beyond his salary as mayor.

In addition, Kilpatrick used his nonprofit Kilpatrick Civic Fund for personal expenses totaling another $153,000, Sauer said. The fund was set up to educate voters and help Detroit children. Kilpatrick used it for things such as yoga lessons, family vacations, summer camp for his sons, moving expenses and travel, the government says.

Sauer said his investigation sums it up:

"Kwame Kilpatrick was living beyond his means."

The government says the extra money came from bribes and kickbacks during his tenure as mayor, with help from his codefendants.

Assistant U.S. Attorney Michael Bullotta asked Sauer whether he found any evidence that the income could be explained by large gifts, loan repayments, inheritances and other types of non-taxable income, as the defense has suggested.

Sauer said no.

Thomas questioned the depth of Sauer’s investigation, suggesting the IRS did little to check whether Carlita Kilpatrick, Kilpatrick's wife, could have earned money during the 1990s. Sauer said he saw no evidence that she earned a “cash horde.”

Thomas told the agent about Kwame Kilpatrick’s 35th birthday party, held at the Atheneum Hotel near Greektown. If 200 people came, Thomas posited, and each gave $50, that would be $100,000, wouldn’t you agree? (Thomas flubbed the math; the total would be $10,000.)

Bullotta, winding up his questioning of Sauer, pointed out that Kilpatrick achieved a law degree before he was mayor. Bullotta asked Sauer whether his investigation turned up that Kilpatrick had taken a tax law class.